115 Ky. 832 | Ky. Ct. App. | 1903
Lead Opinion
Reversing.
This action was instituted by the appellant, the Exchange Bank of Kentucky, against the appellees, C. F. Thomas, administrator of T. W. Priest, .and M. S. Tyler, on the 15th day of July, 1902, to recover a judgment upon a note for $1,160.80 executed to the bank by T. W. Priest, deceased, with appellee M. S. Tyler as his security, which matured on the 14th of January, 1893, subject to a credit of $708.90 as of 1st of May, 1902. The defendant, M. S. Tyler, for answer, said that he was only the security for T. W. Priest for the note sued on, and that more than seven years had elapsed since the maturity thereof, and’ that he was released by the lapse of time and the statute of limitation, which he pleaded in bar of a recovery. In avoidance of the plea of limitation, the bank replied that on the 15th day of January, 1894, .a,t the instance and suggestion and upon the. advice and procurement of the defendant, M. S. Tyler, the deceased, T. W. Priest, deposited to his credit with the plaintiff bank $1,201.35', for the purpose of compelling the bank to appropriate the money to the payment of the note sued on, and that, in pursuance of its duty under the law, it did credit the Priest note, on which defendant Tyler was bound as security, with a sufficient amount of such deposit to extinguish the note, and charged the credit therefor to Priest’s account with the bank; that within six months thereafter a creditor of Priest brought action for the purpose of having this transaction adjudged a fraudulent preference by Priest, under the act of 1856; that both plaintiff and defendant defended this suit, but that it was finally held in the opinion in the case of The Mt. Sterling Bank v. Priest, etc. (111 Ky., 886, 23 R., 1315), 64 S. W., 972, that the act of the bank in applying the money deposited with it by Priest to the pay
The law is well settled in this State that if, at the maturity of a note payable to the bank, the principal had a sufficient sum of money to his credit as a general deposit in the bank, good faith towards his sureties requires that the bank should appropriate the money so held to its payment, and its failure to do so operates as a release of the sureties. See Faulkner v. Cumberland Banking Co., 14 Ky. Law Rep., 923; Pursifull v. Pineville Banking Co., Assignee (97 Ky., 154, 17 R., 38), 30 S. W., 203. So, if appellees’ contention is a sound one, a bank holding a note on an insolvent principal, but amply secured by personal security, occupies this precarious attitude: If it fails to appropriate the money of the insolvent principal in its charge to the payment of the note, it relieves the security. If, on the other hand, it appropriates the money of its
In this case the allegation of the reply is that the appellee Tyler procured the deposit to be made with the appellant bank by his insolvent principal for the express purpose of- forcing it to appropriate the money to its debt or release -him from the obligation. After the deposit by Priest, the bank was forced by law to appropriate the money so held by it to. the payment of its note, or lose all legal recourse, against the appellee Tyler; and, the note being paid, -no -cause of action remained to it against him until -the decision by this court that the appropriation was Illegal. It seems to us that it necessarily follows that the bank was by these acts prevented from the collection of its demand from appellee.
In Newton v. Carson, 80 Ky., 309, 4 R., 1, Newton had filed his petition against Covington as principal -and Carson as surety on a note, but no process was issued there
For reasons indicated, 'we are of the opinion that the trial court erred in sustaining the demurrer to plaintiff’s reply, and the judgment is reversed, and cause remanded, with instructions to overrule the demurrer, and for proceedings not inconsistent with- this opinion.
Petition for rehearing by appellee overruled.
Dissenting Opinion
Dissenting opinion by
I dissent because I am of the opinion that the bank could have brought its suit at any time after the debt matured. If it was misled by the deposit, it was again placed in a position to extricate itself from the effect of it, because within six months it was advised by the suit to have it so treated, that it was a preferential act. When this was done the bank was bound to take notice of the effect of the transaction, and if it desired to keep the statute of limitation from running, it should have brought its suit. After deducting the time which elapsed between the date of the deposit and the institution of the suit to have it adjudged a preferential act, more than seven years elapsed after the maturity of the note until the suit was brought on it. If the surety had pleaded that the deposit paid the note, the bank could have successfully shown it did not amount to a payment of it, because of the preferential character of the act. The debt was never extinguished, and was enforceable.